Nation of Beancounters


Posted in Uncategorized by Navin Kumar on May 11, 2012

Way back in 2000, a group of researchers at Harvard did a few experiments to measure trust:

subjects are paired and meet their partner. They are then separated, and one member of the pair (the sender) has the
opportunity to send between 0 and 15 dollars to his or her partner (the recipient). The experimenter doubles each dollar that is sent. After the second player receives the transfer (i.e., twice the amount sent), he or she may return money back to the Žfirst player. This game is similar to many economically relevant settings such as investment with imperfect contracts or production of a public good. We think of the amount sent by the ‘‘sender’’ as a natural measure of trust. The sender trusts the ‘‘recipient’’ to return a fair share of the amount the recipient receives. Similarly, controlling for the amount sent, the amount returned is a measure of trustworthiness

… we Žfind that subjects who are paired with a partner of a different race or nationality send back less money to their partner. Eleven out of the twelve times in which the recipient sent back nothing, the sender and the recipient were of different races. These effects are stronger than the social network effects and survive controls for the social connection of the sender and recipient. This Žfinding is also unsurprising, but serves as a reminder of the continuing barriers that racial and national differences may create.


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